E11-11 (Depreciation - Change in Estimate) Machinery purchased for $60,000 by To
ID: 2434016 • Letter: E
Question
E11-11 (Depreciation - Change in Estimate) Machinery purchased for $60,000 by Tom Brady Co. in 2003 wasoriginally estimated to have a life of 8 years with a salvage valueof $40,000 at the end of that time. Depreciation has beenentered for 5 years on this basis. In 2008, it is determinedthat the total estimated life should be 10 years with a salvagevalue of $4,500 at the end of that time. Assume thestraight-line method. a.) Prepare the entry to correct the prior years'depreciation, if necessary b.) Prepare the entry to record depreciation for 2008. E11-11 (Depreciation - Change in Estimate) Machinery purchased for $60,000 by Tom Brady Co. in 2003 wasoriginally estimated to have a life of 8 years with a salvage valueof $40,000 at the end of that time. Depreciation has beenentered for 5 years on this basis. In 2008, it is determinedthat the total estimated life should be 10 years with a salvagevalue of $4,500 at the end of that time. Assume thestraight-line method. a.) Prepare the entry to correct the prior years'depreciation, if necessary b.) Prepare the entry to record depreciation for 2008.Explanation / Answer
Initial 03 04 05 06 07 Depreciation per year (60,000-40,000)/8 2,500 2,500 2,500 2,500 2,500 Accumulated Depreciation 2,500 5,000 7,500 10,000 12,500 Adjustment 03 04 05 06 07 Depreciation per year (60,000-4,500)/10 5,550 5,550 5,550 5,550 5,550 Accumulated Depreciation 5,550 11,100 16,650 22,200 27,750 IncomeSummary 15,250 AccumulatedDepreciation 15,250 (to record the adjustment) DepreciationExpense 5,550 AccumulatedDepreciation 5,550 (to record depreciation in year 2008)